THE DISTORTION OF LABOR PRICE: DEFINITION, MEASURE AND IMPACT
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| Title | THE DISTORTION OF LABOR PRICE: DEFINITION, MEASURE AND IMPACT
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| Author | Chen Qin Zhu Hongfei and Fan Xiaoyan |
| Organization | School of Economics, Fudan University |
| Email | qinchen1986@hotmail.com |
| Key Words | Price Distortions; Migration; Wage Residuals; Inequality; Productivity |
| Abstract | Labor price distortion, or wage distortion, is the remaining part after deducting unobserved ability from wage residual. The distortion will increase the degree of inequality and lower productivity, but has not been well studied due to data limitations. We identify the distortion in the wage residual by using migration data to control the unobserved ability and time effect in wage. Low wage distortions were found in the developed, coastal regions. Further analysis illustrate that the variance of wage increased by 15-41%, while the productivity and average wages fell by 21-35% in regions with higher labor price distortion. |
| Serial Number | WP292 |
| Time | 2012-07-13 |
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